The gloomy mood of US consumers amid a surprisingly strong economy has befuddled many economists, but a paper by researchers from the IMF and Harvard University, including former Treasury Secretary Lawrence Summers, proposes that elevated borrowing costs may solve the mystery. The paper argues that increases in the cost of living due to higher financing expenditures faced by consumers — which are not factored into inflation — underpin the recent divergence between official inflation data and consumer sentiment. Quite simply, consumers are including the cost of money in their perspective on their economic health, ... (full story)